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Section 1: 8-K (8-K)

Document


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
 
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (date of earliest event reported): February 8, 2018

FBL Financial Group, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
Iowa
1-11917
42-1411715
(State of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)
 
 
 
5400 University Avenue, West Des Moines, Iowa
50266-5997
(Address of principal executive offices)
 
(Zip Code)
(515) 225-5400
(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a.12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Item 2.02. Results of Operations and Financial Condition

On February 8, 2018, FBL Financial Group, Inc. issued a news release reporting its financial results for the three months ended December 31, 2017 and a related financial supplement. The news release is furnished as Exhibit 99.1 hereto and the Financial Supplement is furnished as Exhibit 99.2 hereto.

The information contained in this Form 8-K including the exhibits attached hereto, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits.

Exhibit No.        Description

99.1            News release of FBL Financial Group, Inc. dated February 8, 2018

99.2            Financial Supplement of FBL Financial Group, Inc. for the quarter ended December 31,
2017

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: February 8, 2018                    FBL FINANCIAL GROUP, INC.

By    /s/ Donald J. Seibel
Donald J. Seibel
Chief Financial Officer


EXHIBIT INDEX

Exhibit No:    Description
Exhibit 99.1 News release of FBL Financial Group, Inc. dated February 8, 2018
Exhibit 99.2 Financial Supplement of FBL Financial Group, Inc. for the quarter ended December 31, 2017




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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit












FOR IMMEDIATE RELEASE
CONTACT:
Thursday, February 8, 2018
Kathleen Till Stange, V.P. Corporate & Investor Relations
 
(515) 226-6780, Kathleen.TillStange@FBLFinancial.com

FBL Financial Group Reports Fourth Quarter and Full Year 2017 Results

West Des Moines, Iowa, February 8, 2018 -

Financial Highlights
(Dollars in thousands, except per share data)
 
Three months ended December 31,
 
2017
 
2016
Net income attributable to FBL Financial Group
$
108,499

 
$
26,880

Non-GAAP operating income(1)  
24,804

 
25,575

Earnings per common share (assuming dilution):
 
 
 
Net income
4.33

 
1.07

Non-GAAP operating income(1) 
0.99

 
1.02

    

FBL Financial Group, Inc. (NYSE: FFG) today reported net income attributable to FBL Financial Group for the fourth quarter of 2017 of $108.5 million, or $4.33 per diluted common share, compared to $26.9 million, or $1.07 per diluted common share, for the fourth quarter of 2016. Non-GAAP operating income(1) totaled $24.8 million, or $0.99 per common share, for the fourth quarter of 2017, compared to $25.6 million, or $1.02 per common share, for the fourth quarter of 2016. Fourth quarter 2017 earnings per share reflects:
A one-time benefit from the Tax Cuts and Jobs Act of 2017 (Tax Act) enacted December 22, 2017 of $85.8 million ($3.42 per share)
The benefit of other investment-related income of $0.13 per share
Unfavorable mortality results in the Life Insurance and Corporate & Other segments
Lower interest sensitive product charges and higher benefit reserves totaling $0.10 per share due to the correction of product charges on a closed block of life insurance business

Non-GAAP operating income differs from the GAAP measure, net income attributable to FBL Financial Group, in that it excludes the initial impact of changes in federal statutory income tax rates and tax laws, realized gains and losses on investments and the change in net unrealized gains and losses on derivatives. For further information on this non-GAAP financial measure, please refer to Note (1) and the reconciliation provided within this release.






"Fourth quarter 2017 earnings results cap off a year in which FBL Financial Group achieved record highs in full year net income and non-GAAP operating income per share. At the same time we maintained a strong capital position and distributed $81 million to our shareholders in 2017 via special and regular dividends," said James P. Brannen, Chief Executive Officer of FBL Financial Group, Inc. "We are well positioned as we move forward in 2018, focused on financial discipline and supporting our Farm Bureau Financial Services agents as they serve clients, fulfilling our purpose to protect livelihoods and futures."

Taxes. Fourth quarter 2017 results include an $85.8 million, or $3.42 per diluted share, benefit from the enactment of the Tax Act. Under the Tax Act, the federal statutory tax rate was changed from 35 percent to 21 percent, effective for 2018. The $85.8 million benefit is due to the remeasurement of net deferred tax liabilities using the reduced corporate tax rate. This was a one-time, non-cash accounting adjustment. FBL Financial Group estimates that its 2018 effective tax rate will be between 17 and 20 percent. This compares to an effective tax rate of 31.7 percent for 2017, excluding the benefit of the Tax Act.

Product Revenues. Premiums and product charges for the fourth quarter of 2017 totaled $75.8 million compared to $78.4 million in the fourth quarter of 2016. Interest sensitive product charges decreased nine percent while traditional life insurance premiums were essentially even compared to the prior year quarter. Interest sensitive product charges were negatively impacted by a $3.5 million adjustment in the fourth quarter of 2017 due to the correction of product charges on a closed block of life insurance business. Premiums collected(2) in the fourth quarter of 2017 totaled $153.7 million compared to $173.2 million in the fourth quarter of 2016. Annuity premiums collected decreased 22 percent while life insurance premiums collected were flat.

Investment Income. Net investment income in the fourth quarter of 2017 totaled $107.3 million, compared to $101.5 million in the fourth quarter of 2016. The increase is primarily due to an increase in average invested assets as well as an increase in other investment-related income. The annualized yield earned on average invested assets, with securities at amortized cost, including investments held as securities and indebtedness of related parties, was 5.30 percent for the year ended December 31, 2017, compared to 5.32 percent for the year ended December 31, 2016. At December 31, 2017, 97 percent of the fixed maturity securities in FBL Financial Group's investment portfolio were investment grade debt securities.

Benefits and Expenses. Benefits and expenses totaled $153.4 million in the fourth quarter of 2017, compared to $149.0 million in the fourth quarter of 2016. Death benefits, net of reinsurance and reserves released, totaled $29.2 million in the fourth quarter of 2017, compared to $31.7 million in the fourth quarter of 2016. By its nature, mortality experience can fluctuate from quarter to quarter.

Net Realized Gains/Losses on Investments. In the fourth quarter of 2017, FBL Financial Group recognized net realized losses on investments of $3.9 million attributable to impairments. Included in this amount is $2.4 million of impairment losses related to a decline in value of low income housing tax credit investments as a result of the Tax Act.

Stock Repurchases. During the fourth quarter of 2017, FBL Financial Group repurchased 3,511 shares of its Class A common stock. FBL Financial Group has $49.2 million remaining under its current stock repurchase program.







Capital and Book Value. As of December 31, 2017, the book value per share of FBL Financial Group common stock totaled $55.59, compared to $47.61 at December 31, 2016. Book value per share, excluding accumulated other comprehensive income(3), totaled $46.09 at December 31, 2017, compared to $41.60 at December 31, 2016. The enactment of the Tax Act resulted in a $3.53 per share increase to book value and a $3.44 per share increase to book value excluding accumulated other comprehensive income(3). The December 31, 2017 company action level risk based capital ratio of FBL Financial Group's wholly owned subsidiary, Farm Bureau Life Insurance Company, was approximately 552 percent.

Further Financial Information. Further information on FBL Financial Group's financial results, including results by segment, may be found in FBL Financial Group's financial supplement, available on its website, www.fblfinancial.com.

Conference Call. FBL Financial Group will hold a conference call with investors tomorrow, February 9, 2018, at 9:00 a.m. Eastern Time. The call will be webcast and a replay will be available on FBL Financial Group's website.

Certain statements in this release concerning FBL Financial Group's prospects for the future are forward-looking statements intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act. These statements generally can be identified by their context, including terms such as “believes,” “anticipates,” “expects,” or similar words. These statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statement. These risks and uncertainties are detailed in FBL Financial Group's reports filed with the Securities and Exchange Commission and include, but are not limited to, changes in interest rates, difficult conditions in financial markets and the economy, lack of liquidity and access to capital, investment valuations, competitive factors, a decrease in ratings, changes in laws and regulations, differences between actual claims experience and underwriting assumptions, relationships with Farm Bureau organizations, the ability to attract and retain sales agents and adverse results from litigation. These forward-looking statements are based on assumptions which FBL Financial Group believes to be reasonable; however, no assurance can be given that the assumptions will prove to be correct. FBL Financial Group undertakes no obligation to update any forward-looking statements.

FBL Financial Group is a holding company whose purpose is to protect livelihoods and futures. Its primary operating subsidiary, Farm Bureau Life Insurance Company, underwrites and markets a broad range of life insurance and annuities to individuals and businesses, which are distributed by multiline exclusive Farm Bureau agents. In addition, FBL Financial Group manages all aspects of two Farm Bureau affiliated property-casualty insurance companies for a management fee. FBL Financial Group, headquartered in West Des Moines, Iowa, is traded on the New York Stock Exchange under the symbol FFG. For more information, please visit www.fblfinancial.com.

- FINANCIAL INFORMATION AND NOTES FOLLOW -




FBL Financial Group, Inc.
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share data)

 
Three months ended
 
Year ended
 
December 31,
 
December 31,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Interest sensitive product charges
$
26,275

 
$
28,939

 
$
112,936

 
$
111,928

Traditional life insurance premiums
49,547

 
49,489

 
195,330

 
196,914

Net investment income
107,347

 
101,549

 
415,199

 
404,170

Net realized capital gains on sales of investments

 
3,139

 
599

 
3,106

 
 
 
 
 
 
 
 
Total other-than-temporary impairment losses
(3,853
)
 
(3,551
)
 
(3,986
)
 
(7,320
)
Non-credit portion in other comprehensive income

 
929

 

 
2,451

Net impairment losses recognized in earnings
(3,853
)
 
(2,622
)
 
(3,986
)
 
(4,869
)
 
 
 
 
 
 
 
 
Other income
3,689

 
3,685

 
15,400

 
15,165

Total revenues
183,005

 
184,179

 
735,478

 
726,414

 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
Interest sensitive product benefits
63,661

 
59,726

 
251,878

 
238,586

Traditional life insurance benefits
44,826

 
47,623

 
173,023

 
177,682

Policyholder dividends
2,543

 
2,560

 
10,140

 
10,574

Underwriting, acquisition and insurance expenses
36,649

 
33,530

 
134,878

 
135,967

Interest expense
1,212

 
1,212

 
4,850

 
4,850

Other expenses
4,520

 
4,319

 
18,382

 
16,966

Total benefits and expenses
153,411

 
148,970

 
593,151

 
584,625

 
29,594

 
35,209

 
142,327

 
141,789

Income tax benefit (expense)
76,573

 
(11,373
)
 
40,729

 
(46,010
)
Equity income, net of related income taxes
2,340

 
3,047

 
11,299

 
11,440

Net income
108,507

 
26,883

 
194,355

 
107,219

Net loss (income) attributable to noncontrolling interest
(8
)
 
(3
)
 
(28
)
 
4

Net income attributable to FBL Financial Group, Inc.
$
108,499

 
$
26,880

 
$
194,327

 
$
107,223

 
 
 
 
 
 
 
 
Earnings per common share - assuming dilution
$
4.33

 
$
1.07

 
$
7.75

 
$
4.28

 
 
 
 
 
 
 
 
Weighted average common shares
25,039,449

 
25,007,438

 
25,038,334

 
24,985,400

Effect of dilutive securities
17,087

 
32,662

 
19,111

 
43,683

Weighted average common shares - diluted
25,056,536

 
25,040,100

 
25,057,445

 
25,029,083

 
 
 
 
 
 
 
 





(1) Reconciliation of Net Income Attributable to FBL Financial Group to Non-GAAP Operating Income - Unaudited

In addition to net income, FBL Financial Group has consistently utilized non-GAAP operating income, a financial measure common in the life insurance industry that is not prepared in accordance with U.S. generally accepted accounting principles (GAAP), as a primary economic measure to evaluate its financial performance. Non-GAAP operating income equals net income attributable to FBL Financial Group adjusted to exclude the initial impact of changes in federal statutory income tax rates and tax laws, realized gains and losses on investments and the change in net unrealized gains and losses on derivatives, which can fluctuate greatly from period to period. These fluctuations make it difficult to analyze core operating trends. In addition, for derivatives not designated as hedges, there is a mismatch between the valuation of the asset and liability when deriving net income (loss). Specifically, call options relating to indexed business are one-year assets while the embedded derivatives in the indexed contracts represent the rights of the contract holder to receive index credits over the entire period the indexed annuities are expected to be in force. This non-GAAP measure is used for goal setting, determining short-term incentive compensation and evaluating performance on a basis comparable to that used by many in the investment community. FBL Financial Group believes the combined presentation and evaluation of non-GAAP operating income, together with net income, provides information that may enhance an investor's understanding of FBL Financial Group's underlying results and profitability. A reconciliation is provided in the following table:
 
Three months ended
 
Year ended
 
December 31,
 
December 31,
 
2017
 
2016
 
2017
 
2016
 
(Dollars in thousands,
except per share data)
Net income attributable to FBL Financial Group
$
108,499

 
$
26,880

 
$
194,327

 
$
107,223

Adjustments:
 
 
 
 
 
 
 
Initial impact of the Tax Act
(85,797
)
 

 
(85,797
)
 

Net realized gains/losses on investments (a)
2,578

 
(429
)
 
2,381

 
713

Change in net unrealized gains/losses on derivatives(a)
(476
)
 
(876
)
 
(2,549
)
 
(1,485
)
Non-GAAP operating income
$
24,804

 
$
25,575

 
$
108,362

 
$
106,451

 
 
 
 
 
 
 
 
Non-GAAP operating income per common share - assuming dilution
$
0.99

 
$
1.02

 
$
4.32

 
$
4.25

 
 
 
 
 
 
 
 
 
(a) Net of adjustments, as applicable, to amortization of unearned revenue reserves, deferred acquisition costs, value of insurance in force acquired, interest sensitive policy reserves and income taxes attributable to these items.

(2) Premiums Collected - Net statutory premiums collected is a non-GAAP measure and includes premiums collected from annuities and universal life-type products. It is a useful metric for investors as it is a measure of sales production.
For GAAP reporting, these premiums received are not reported as revenues.

(3) Reconciliation of Book Value Per Share Excluding Accumulated Other Comprehensive Income - Unaudited
 
December 31,
2017
 
December 31,
2016
Book value per share
$
55.59

 
$
47.61

Less: Per share impact of accumulated other comprehensive income
9.50

 
6.01

Book value per share, excluding accumulated other comprehensive income
$
46.09

 
$
41.60


Book value per share excluding accumulated other comprehensive income is a non-GAAP financial measure. Accumulated other comprehensive income totaled $236.8 million at December 31, 2017 and $149.6 million at December 31, 2016. Since accumulated other comprehensive income fluctuates from quarter to quarter due to unrealized changes in the fair value of investments caused principally by changes in market interest rates, FBL Financial Group believes this non-GAAP financial measure provides useful supplemental information.




FBL Financial Group, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)

 
December 31,
2017
 
December 31,
2016
Assets
 
 
 
Investments
$
8,620,243

 
$
8,174,660

Cash and cash equivalents
52,696

 
33,583

Deferred acquisition costs
302,611

 
330,324

Other assets
439,100

 
430,495

Assets held in separate accounts
651,963

 
597,072

Total assets
$
10,066,613

 
$
9,566,134

 
 
 
 
Liabilities and stockholders' equity
 
 
 
Liabilities
 
 
 
Future policy benefits
$
7,050,465

 
$
6,799,417

Other policy funds, claims and benefits
634,128

 
638,848

Debt
97,000

 
97,000

Other liabilities
244,207

 
245,539

Liabilities related to separate accounts
651,963

 
597,072

Total liabilities
8,677,763

 
8,377,876

 
 
 
 
Stockholders' equity
 
 
 
FBL Financial Group, Inc. stockholders' equity:
 
 
 
Preferred stock
3,000

 
3,000

Class A common stock
153,589

 
152,903

Class B common stock
72

 
72

Accumulated other comprehensive income
236,757

 
149,555

Retained earnings
995,374

 
882,672

Total FBL Financial Group, Inc. stockholders' equity
1,388,792

 
1,188,202

Noncontrolling interest
58

 
56

Total stockholders' equity
1,388,850

 
1,188,258

Total liabilities and stockholders' equity
$
10,066,613

 
$
9,566,134

 
 
 
 
Common shares outstanding
24,930,526

 
24,893,955


####






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Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit




FBL FINANCIAL GROUP, INC.
INVESTOR SUPPLEMENT
Fourth Quarter









392115223_armainimagesupplementa02.jpg






392115223_ffglogoa02.jpg








 
 
Corporate Headquarters
FBL Financial Group, Inc.
 
5400 University Avenue
 
West Des Moines, Iowa 50266-5997
 
(515) 225-5400
Financial Inquiries
For more information contact:
 
Kathleen Till Stange
 
Vice President Corporate & Investor Relations
 
Kathleen.TillStange@FBLFinancial.com
 
(515) 226-6780
Internet Information
FBL Financial Group, Inc.
 
www.fblfinancial.com
Stock Symbol
NYSE: FFG
Transfer Agent
American Stock Transfer & Trust Company, LLC
 
6201 15th Avenue
 
Brooklyn, NY 11219
 
http://www.amstock.com
 
 


















FBL Financial Group, Inc.
 
 
Financial Supplement (Unaudited)
 
 
December 31, 2017
 
 
Table of Contents/Notes
 
 
 
 
 
Consolidated Financial Statements:
 
 
Consolidated Balance Sheets
 
Consolidated Statements of Comprehensive Income
 
Consolidated Statements of Comprehensive Income, last five quarters
 
Net Income to Non-GAAP Operating Income Reconciliation and Pre-tax Non-GAAP Operating Income by Segment, last five quarters
 
Financial Information by Segment:
 
 
Segment Information
 
Statements of Pre-tax Non-GAAP Operating Income, last five quarters:
 
 
Annuity Segment
 
Life Insurance Segment
 
Corporate and Other Segment
 
Deferred Acquisition Costs by Segment
 
Impact of Unlocking on Pre-tax Non-GAAP Operating Income
 
Collected Premiums, last five quarters
 
Other Information
 

NOTE 1: In addition to net income as determined using U.S. Generally Accepted Accounting Principles (GAAP), we have consistently used non-GAAP operating income (a measure of earnings not recognized under GAAP), a financial measure common in the life insurance industry, as a primary economic measure to evaluate our financial performance. Non-GAAP operating income for the periods presented equals net income adjusted to eliminate the impact of realized gains and losses on investments and changes in net unrealized gains and losses on derivatives. During 2017, we revised our non-GAAP operating income definition to remove from net income the initial impact to deferred income taxes from a change in tax laws. Such changes can create an unusual one-time remeasurement of deferred taxes not reflective of normal operations. The revision did not impact 2016 or 2015 non-GAAP operating earnings but did affect 2017, with the recent passage of the Tax Cuts and Jobs Act of 2017.

We use non-GAAP operating income, in addition to net income, to measure our performance since realized gains and losses on investments and the change in net unrealized gains and losses on derivatives can fluctuate greatly from quarter to quarter. These fluctuations make it difficult to analyze core operating trends. A view of our non-GAAP operating performance without the impact of these items enhances the analysis of our results. We use non-GAAP operating income for goal setting, determining short-term incentive compensation and evaluating performance on a basis comparable to that used by many in the investment community.

FBL Financial Group’s policy for calculating non-GAAP operating income is intended to accurately reflect offsets resulting from the adjustments to net income used to calculate non-GAAP operating income. Due to changes in product offerings since the last amendment to this policy, in the fourth quarter of 2016 FBL Financial Group refined its calculation of non-GAAP operating income to include offsets relating to interest sensitive product reserves. These offsets to interest sensitive product reserves, net of tax, increased non-GAAP operating income $0.9 million for the full year 2016 and were recorded in the fourth quarter. These offsets, net of tax, decreased non-GAAP operating income $0.5 million in 2017.

NOTE 2: Certain financial information presented herein may not add due to rounding.


1




FBL Financial Group, Inc.
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)

 
December 31,
2017
 
December 31,
2016
Assets
 
 
 
Investments:
 
 
 
Fixed maturities - available for sale, at fair value (amortized cost: 2017 - $6,757,250; 2016 - $6,661,711)
$
7,291,967

 
$
7,008,790

Equity securities - available for sale, at fair value (cost: 2017 - $123,320; 2016 - $130,479)
130,750

 
132,968

Mortgage loans
971,812

 
816,471

Real estate
1,543

 
1,955

Policy loans
191,398

 
188,254

Short-term investments
17,007

 
16,348

Other investments
15,766

 
9,874

Total investments
8,620,243

 
8,174,660

 
 
 
 
Cash and cash equivalents
52,696

 
33,583

Securities and indebtedness of related parties
130,240

 
137,422

Accrued investment income
76,468

 
78,437

Amounts receivable from affiliates
3,561

 
3,790

Reinsurance recoverable
108,948

 
105,290

Deferred acquisition costs
302,611

 
330,324

Value of insurance in force acquired
4,560

 
9,226

Current income taxes recoverable
3,269

 
4,309

Other assets
112,054

 
92,021

Assets held in separate accounts
651,963

 
597,072

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
10,066,613

 
$
9,566,134




2




FBL Financial Group, Inc.
Consolidated Balance Sheets (Continued)
(Dollars in thousands)

 
December 31,
2017
 
December 31,
2016
Liabilities and stockholders' equity
 
 
 
Liabilities:
 
 
 
Future policy benefits:
 
 
 
Interest sensitive products
$
5,299,961

 
$
5,100,625

Traditional life insurance and accident and health products
1,750,504

 
1,698,792

Other policy claims and benefits
44,475

 
43,395

Supplementary contracts without life contingencies
322,630

 
330,232

Advance premiums and other deposits
267,023

 
265,221

Amounts payable to affiliates
1,164

 
862

Long-term debt payable to non-affiliates
97,000

 
97,000

Deferred income taxes
131,912

 
163,495

Other liabilities
111,131

 
81,182

Liabilities related to separate accounts
651,963

 
597,072

Total liabilities
8,677,763

 
8,377,876

 
 
 
 
Stockholders' equity:
 
 
 
FBL Financial Group, Inc. stockholders' equity:
 
 
 
Preferred stock, without par value, at liquidation value - authorized 10,000,000 shares, issued and outstanding 5,000,000 Series B shares
3,000

 
3,000

Class A common stock, without par value - authorized 88,500,000 shares, issued and outstanding 24,919,113 in 2017 and 24,882,542 shares in 2016
153,589

 
152,903

Class B common stock, without par value - authorized 1,500,000 shares, issued and outstanding 11,413 shares in 2017 and 2016
72

 
72

Accumulated other comprehensive income
236,757

 
149,555

Retained earnings
995,374

 
882,672

Total FBL Financial Group, Inc. stockholders' equity
1,388,792

 
1,188,202

Noncontrolling interest
58

 
56

Total stockholders' equity
1,388,850

 
1,188,258

Total liabilities and stockholders' equity
$
10,066,613

 
$
9,566,134




3




FBL Financial Group, Inc.
Consolidated Statements of Comprehensive Income (Unaudited)
(Dollars in thousands, except per share data)

 
Three months ended December 31,
 
Year ended December 31,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Interest sensitive product charges
$
26,275

 
$
28,939

 
$
112,936

 
$
111,928

Traditional life insurance premiums
49,547

 
49,489

 
195,330

 
196,914

Net investment income
107,347

 
101,549

 
415,199

 
404,170

Net realized capital gains on sales of investments

 
3,139

 
599

 
3,106

 

 

 
 
 
 
Total other-than-temporary impairment losses
(3,853
)
 
(3,551
)
 
(3,986
)
 
(7,320
)
Non-credit portion in other comprehensive income

 
929

 

 
2,451

Net impairment losses recognized in earnings
(3,853
)
 
(2,622
)
 
(3,986
)
 
(4,869
)
Other income
3,689

 
3,685

 
15,400

 
15,165

Total revenues
183,005

 
184,179

 
735,478

 
726,414

 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
Interest sensitive product benefits
63,661

 
59,726

 
251,878

 
238,586

Traditional life insurance benefits
44,826

 
47,623

 
173,023

 
177,682

Policyholder dividends
2,543

 
2,560

 
10,140

 
10,574

Underwriting, acquisition and insurance expenses
36,649

 
33,530

 
134,878

 
135,967

Interest expense
1,212

 
1,212

 
4,850

 
4,850

Other expenses
4,520

 
4,319

 
18,382

 
16,966

Total benefits and expenses
153,411

 
148,970

 
593,151

 
584,625

 
29,594

 
35,209

 
142,327

 
141,789

Income tax benefit (loss)
76,573

 
(11,373
)
 
40,729

 
(46,010
)
Equity income, net of related income taxes
2,340

 
3,047

 
11,299

 
11,440

Net income
108,507

 
26,883

 
194,355

 
107,219

Net loss (income) attributable to noncontrolling interest
(8
)
 
(3
)
 
(28
)
 
4

Net income attributable to FBL Financial Group, Inc.
$
108,499

 
$
26,880

 
$
194,327

 
$
107,223

 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to FBL Financial Group, Inc.
$
121,387

 
$
(116,393
)
 
$
281,529

 
$
142,246

 
 
 
 
 
 
 
 
Earnings per common share
$
4.33

 
$
1.07

 
$
7.76

 
$
4.29

Earnings per common share - assuming dilution
$
4.33

 
$
1.07

 
$
7.75

 
$
4.28

 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.44

 
$
0.42

 
$
1.76

 
$
1.68

Special cash dividend per common share
$

 
$

 
$
1.50

 
$
2.00



4




FBL Financial Group, Inc.
Consolidated Statements of Comprehensive Income (Unaudited) - Quarterly
(Dollars in thousands, except per share data)

 
Q4 2016
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
Revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
28,939

 
$
29,201

 
$
29,456

 
$
28,004

 
$
26,275

Traditional life insurance premiums
49,489

 
48,434

 
50,262

 
47,087

 
49,547

Net investment income
101,549

 
100,994

 
103,908

 
102,950

 
107,347

Net realized capital gains (losses) on sales of investments
3,139

 
(403
)
 
921

 
81

 

 

 
 
 
 
 
 
 
 
Total other-than-temporary impairment losses
(3,551
)
 
(66
)
 

 
(67
)
 
(3,853
)
Non-credit portion in other comprehensive income
929

 

 

 

 

Net impairment losses recognized in earnings
(2,622
)
 
(66
)
 

 
(67
)
 
(3,853
)
Other income
3,685

 
3,760

 
4,450

 
3,501

 
3,689

Total revenues
184,179

 
181,920

 
188,997

 
181,556

 
183,005

 
 
 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
59,726

 
62,760

 
58,251

 
67,206

 
63,661

Traditional life insurance benefits
47,623

 
42,954

 
42,610

 
42,633

 
44,826

Policyholder dividends
2,560

 
2,553

 
2,557

 
2,487

 
2,543

Underwriting, acquisition and insurance expenses
33,530

 
34,353

 
36,341

 
27,535

 
36,649

Interest expense
1,212

 
1,212

 
1,213

 
1,213

 
1,212

Other expenses
4,319

 
4,151

 
4,740

 
4,971

 
4,520

Total benefits and expenses
148,970

 
147,983

 
145,712

 
146,045

 
153,411

 
35,209

 
33,937

 
43,285

 
35,511

 
29,594

Income tax benefit (loss)
(11,373
)
 
(10,733
)
 
(13,891
)
 
(11,220
)
 
76,573

Equity income, net of related income taxes
3,047

 
3,231

 
2,924

 
2,804

 
2,340

Net income
26,883

 
26,435

 
32,318

 
27,095

 
108,507

Net loss (income) attributable to noncontrolling interest
(3
)
 
(2
)
 
(27
)
 
9

 
(8
)
Net income attributable to FBL Financial Group, Inc.
$
26,880

 
$
26,433

 
$
32,291

 
$
27,104

 
$
108,499

 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to FBL Financial Group, Inc.
$
(116,393
)
 
$
42,476

 
$
79,050

 
$
38,616

 
$
121,387

 
 
 
 
 
 
 
 
 
 
Earnings per common share
$
1.07

 
$
1.05

 
$
1.29

 
$
1.08

 
$
4.33

Earnings per common share - assuming dilution
$
1.07

 
$
1.05

 
$
1.29

 
$
1.08

 
$
4.33

 
 
 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.42

 
$
0.44

 
$
0.44

 
$
0.44

 
$
0.44

Special cash dividend per common share
$

 
$
1.50

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding (in thousands):
 
 
 
 
 
 
 
 
 
Basic
25,007

 
25,030

 
25,031

 
25,037

 
25,039

Effect of dilutive securities
33

 
22

 
20

 
18

 
18

Diluted
25,040

 
25,052

 
25,051

 
25,055

 
25,057



5




FBL Financial Group, Inc.
Net Income to Non-GAAP Operating Income Reconciliation and Pre-tax Non-GAAP Operating Income by Segment
(Dollars in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017
 
 
 
 
 
 
 
 
 
 
Net income attributable to FBL Financial Group, Inc.
$
26,880

 
$
26,433

 
$
32,291

 
$
27,104

 
$
108,499

Net income adjustments:
 
 
 
 
 
 
 
 
 
Federal tax rate change

 

 

 

 
(85,797
)
Realized gains/losses on investments (1)
(429
)
 
554

 
(788
)
 
38

 
2,578

Change in net unrealized gains/losses on derivatives (1)
(876
)
 
1

 
(686
)
 
(1,389
)
 
(476
)
Non-GAAP operating income
$
25,575

 
$
26,988

 
$
30,817

 
$
25,753

 
$
24,804

 
 
 
 
 
 
 
 
 
 
Non-GAAP operating income per common share - assuming dilution
$1.02
 
$1.08
 
$1.23
 
$1.03
 
$0.99
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating return on equity, excluding AOCI - last twelve months
10.5%
 
10.6%
 
11.0%
 
10.6%
 
10.3%
Non-GAAP operating return on equity, including AOCI - last twelve months
8.8%
 
8.7%
 
9.0%
 
8.8%
 
8.6%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017
Impact of Adjustments on FBL Net Income
 
 
 
 
 
 
 
 
 
Federal tax rate change
$

 
$

 
$

 
$

 
$
85,797

Realized gains/losses on investments
517

 
(469
)
 
921

 
14

 
(3,853
)
Change in net unrealized gains/losses on derivatives
2,685

 
(49
)
 
107

 
1,897

 
629

Change in amortization of:

 

 

 

 
 
Deferred acquisition costs
115

 
265

 
349

 
117

 
149

Unearned revenue reserve
5

 
(12
)
 
(127
)
 
(137
)
 
(239
)
Reserve change offset on interest sensitive products
(1,314
)
 
(590
)
 
1,018

 
187

 
79

Income tax offset
(703
)
 
300

 
(794
)
 
(727
)
 
1,133

Net impact of net income adjustments
$
1,305

 
$
(555
)
 
$
1,474

 
$
1,351

 
$
83,695

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017
Pre-tax non-GAAP operating income by segment:
 
 
 
 
 
 
 
 
 
Annuity segment
$
15,454

 
$
16,421

 
$
18,174

 
$
17,015

 
$
17,211

Life Insurance segment
12,188

 
13,749

 
17,631

 
12,620

 
9,856

Corporate and Other segment
4,868

 
4,162

 
4,195

 
2,638

 
3,866

Total pre-tax non-GAAP operating income
32,510

 
34,332

 
40,000

 
32,273

 
30,933

Income taxes on non-GAAP operating income
(6,935
)
 
(7,344
)
 
(9,183
)
 
(6,520
)
 
(6,129
)
Non-GAAP operating income
$
25,575

 
$
26,988

 
$
30,817

 
$
25,753

 
$
24,804


(1)
Amounts are net of adjustments, as applicable, to amortization of unearned revenue reserves, deferred sales inducements and deferred acquisition costs, as well as changes in interest sensitive product reserves and income taxes attributable to these items.


6





FBL Financial Group, Inc.
Segment Information

We analyze operations by reviewing financial information regarding our primary products that are aggregated into the Annuity and Life Insurance product segments. In addition, our Corporate and Other segment includes various support operations, corporate capital and other product lines that are not currently underwritten by the Company.

The Annuity segment primarily consists of fixed rate and index annuities and supplementary contracts (some of which involve life contingencies). Fixed rate and index annuities provide for tax-deferred savings and supplementary contracts provide for the systematic repayment of funds that accumulate interest. Fixed rate annuities consist primarily of flexible premium deferred annuities, but also include single premium deferred and immediate contracts. With fixed rate annuities, we bear the underlying investment risk and credit interest to the contracts at rates we determine, subject to interest rate guarantees. With index annuity products, we bear the underlying investment risk and credit interest in an amount equal to a percentage of the gain in a specified market index, subject to minimum guarantees.

The Life Insurance segment consists of whole life, term life and universal life policies. These policies provide benefits upon the death of the insured and may also allow the customer to build cash value on a tax-deferred basis.

The Corporate and Other segment consists of the following corporate items and products/services that do not meet the quantitative threshold for separate segment reporting:
 
investments and related investment income not specifically allocated to our product segments;
 
interest expense;
 
closed blocks of variable annuity, variable universal life insurance and accident and health insurance products;
 
advisory services for the management of investments and other companies;
 
marketing and distribution services for the sale of mutual funds and insurance products not issued by us; and
 
leasing services, primarily with affiliates.

We analyze our segment results based on pre-tax non-GAAP operating income. Accordingly, income taxes are not allocated to the segments. In addition, non-GAAP operating results are reported net of transactions between the segments.

7




FBL Financial Group, Inc.
Statements of Pre-tax Non-GAAP Operating Income
Annuity Segment
 
 
 
 
 
 
 
 
 
 
 
Q4 2016
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
Pre-tax Non-GAAP Operating Income
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
1,039

 
$
1,135

 
$
1,202

 
$
1,115

 
$
1,032

Net investment income
52,475

 
53,916

 
55,631

 
53,878

 
56,275

Total non-GAAP operating revenues
53,514

 
55,051

 
56,833

 
54,993

 
57,307

 
 
 
 
 
 
 
 
 
 
Non-GAAP operating benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
29,829

 
29,878

 
29,865

 
31,385

 
31,096

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
614

 
531

 
483

 
537

 
611

Amortization of deferred acquisition costs
2,711

 
2,528

 
2,783

 
505

 
2,690

Amortization of value of insurance in force acquired
169

 
170

 
170

 
169

 
169

Other underwriting expenses
4,737

 
5,523

 
5,358

 
5,382

 
5,530

Total underwriting, acquisition and insurance expenses
8,231

 
8,752

 
8,794

 
6,593

 
9,000

Total non-GAAP operating benefits and expenses
38,060

 
38,630

 
38,659

 
37,978

 
40,096

Pre-tax non-GAAP operating income
$
15,454

 
$
16,421

 
$
18,174

 
$
17,015

 
$
17,211

 
 
 
 
 
 
 
 
 
 
Selected balance sheet data, securities at amortized cost:
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Investments
$
4,316,806

 
$
4,357,562

 
$
4,395,757

 
$
4,382,218

 
$
4,470,721

Deferred acquisition costs
88,762

 
89,108

 
89,752

 
91,802

 
92,116

Value of insurance in force acquired
4,204

 
4,034

 
3,864

 
3,695

 
3,526

 
 
 
 
 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Interest sensitive product reserves
$
3,827,295

 
$
3,863,647

 
$
3,872,179

 
$
3,884,541

 
$
3,963,187

Other insurance reserves
364,966

 
368,378

 
364,368

 
358,691

 
355,877

Allocated equity, excluding AOCI
264,112

 
266,618

 
266,902

 
267,324

 
272,101

 
 
 
 
 
 
 
 
 
 
Other data:
 
 
 
 
 
 
 
 
 
Number of direct contracts
53,676

 
53,528

 
53,390

 
53,218

 
53,250

 
 
 
 
 
 
 
 
 
 
Portfolio yield net of assumed defaults
4.71
%
 
4.67
%
 
4.60
%
 
4.58
%
 
4.50
%
Credited rate
2.70

 
2.69

 
2.64

 
2.63

 
2.56

Spread on individual annuities at end of quarter (1)
2.01
%
 
1.98
%
 
1.96
%
 
1.95
%
 
1.94
%
 
 
 
 
 
 
 
 
 
 
Interest sensitive reserve activity:
 
 
 
 
 
 
 
 
 
Individual annuity reserve:
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
2,936,817

 
$
2,984,644

 
$
3,022,180

 
$
3,057,952

 
$
3,082,310

Deposits
84,125

 
80,219

 
75,439

 
55,383

 
66,097

Withdrawals, surrenders and death benefits
(47,417
)
 
(46,610
)
 
(46,700
)
 
(45,450
)
 
(49,428
)
Net flows
36,708

 
33,609

 
28,739

 
9,933

 
16,669

 
 
 
 
 
 
 
 
 
 
Policyholder interest
19,770

 
20,710

 
20,826

 
21,041

 
20,817

Annuitizations and other
(8,651
)
 
(16,783
)
 
(13,793
)
 
(6,616
)
 
(10,007
)
Balance, end of period
2,984,644

 
3,022,180

 
3,057,952

 
3,082,310

 
3,109,789

Other interest sensitive reserves
842,651

 
841,467

 
814,227

 
802,231

 
853,398

Total interest sensitive product reserves
$
3,827,295

 
$
3,863,647

 
$
3,872,179

 
$
3,884,541

 
$
3,963,187


(1)
Point-in-time spread at the balance sheet date used by management for decision making, which differs from the spread earned during the reporting period disclosed in the Form 10Q or 10K.

8




FBL Financial Group, Inc.
Statements of Pre-tax Non-GAAP Operating Income
Life Insurance Segment
 
 
 
 
 
 
 
 
 
 
 
Q4 2016
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
Pre-tax Non-GAAP Operating Income
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
16,797

 
$
17,100

 
$
17,487

 
$
16,633

 
$
14,230

Traditional life insurance premiums
49,489

 
48,434

 
50,262

 
47,087

 
49,547

Net investment income
38,876

 
38,769

 
39,436

 
38,995

 
41,118

Other income
(73
)
 
(160
)
 
(117
)
 
(88
)
 
(140
)
Total non-GAAP operating revenues
105,089

 
104,143

 
107,068

 
102,627

 
104,755

 
 
 
 
 
 
 
 
 
 
Non-GAAP operating benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits:
 
 
 
 
 
 
 
 
 
Interest credited
8,225

 
8,187

 
7,983

 
7,913

 
8,951

Death benefits and other
13,119

 
14,272

 
13,622

 
16,945

 
13,759

Total interest sensitive product benefits
21,344

 
22,459

 
21,605

 
24,858

 
22,710

Traditional life insurance benefits:
 
 
 
 
 
 
 
 
 
Death benefits
25,229

 
21,667

 
19,997

 
21,530

 
23,707

Surrender and other benefits
7,574

 
10,429

 
8,936

 
7,409

 
8,642

Increase in traditional life future policy benefits
14,817

 
10,859

 
13,678

 
13,694

 
12,477

Total traditional life insurance benefits
47,620

 
42,955

 
42,611

 
42,633

 
44,826

Policyholder dividends
2,560

 
2,553

 
2,557

 
2,487

 
2,543

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
4,577

 
4,903

 
4,874

 
4,544

 
4,919

Amortization of deferred acquisition costs
3,724

 
3,911

 
4,519

 
1,122

 
4,816

Amortization of value of insurance in force acquired
377

 
375

 
375

 
375

 
375

Other underwriting expenses
12,699

 
14,404

 
14,185

 
14,536

 
14,448

Total underwriting, acquisition and insurance expenses
21,377

 
23,593

 
23,953

 
20,577

 
24,558

Total non-GAAP operating benefits and expenses
92,901

 
91,560

 
90,726

 
90,555

 
94,637

 
$
12,188

 
$
12,583

 
$
16,342

 
$
12,072

 
$
10,118

Equity income (loss), before tax (1)

 
1,166

 
1,289

 
548

 
(262
)
Pre-tax non-GAAP operating income
$
12,188

 
$
13,749

 
$
17,631

 
$
12,620

 
$
9,856

 
 
 
 
 
 
 
 
 
 
Selected balance sheet data, securities at amortized cost:
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Investments
$
2,876,555

 
$
2,878,865

 
$
2,913,608

 
$
2,942,395

 
$
2,935,517

Deferred acquisition costs
267,545

 
271,454

 
275,356

 
282,116

 
287,421

Value of insurance in force acquired
17,404

 
17,029

 
16,654

 
16,279

 
15,904

 
 
 
 
 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
Liabilities: (2)
 
 
 
 
 
 
 
 
 
Interest sensitive reserves
$
899,207

 
$
905,454

 
$
916,067

 
$
930,850

 
$
944,690

Other insurance reserves
1,887,539

 
1,902,738

 
1,917,124

 
1,933,051

 
1,951,565

Allocated equity, excluding AOCI
386,315

 
382,319

 
386,413

 
391,464

 
396,571


 

9




FBL Financial Group, Inc.
Statements of Pre-tax Non-GAAP Operating Income
Life Insurance Segment (Continued)
 
 
 
 
 
 
 
 
 
 
 
Q4 2016
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
 
(Dollars in thousands)